Jet Airways: How Imbalance of Cost and Revenue Led to Business Failure

This report examines the failure of Jet Airways, focusing on the critical role of its cost and revenue structure. The introduction highlights the airline's initial success and subsequent financial losses, attributing the downfall to a mismatch between costs and revenue generation. The rationale emphasizes the strategic missteps, such as offering discounted fares despite rising fuel prices, leading to losses. The aim is to analyze the impact of the faulty cost and revenue structure, with objectives including identifying the relationship between cost and revenue, ascertaining reasons behind discounted prices, evaluating the pressure on employees, and developing recommendations. The literature review explores the relationship between cost and revenue, the reasons behind discounted prices and challenges within the workplace. The methodology section outlines the approach to data analysis. The findings reveal the consequences of the imbalance, leading to the conclusion that the faulty cost and revenue structure significantly contributed to Jet Airways' collapse. The report concludes with recommendations for improved financial management and strategic decision-making within the airline industry. Evidence such as questionnaire is attached.

MANAGEMENT REPORT

TABLE OF CONTENTS
TITLE..............................................................................................................................................3
INTRODUCTION...........................................................................................................................3
Rationale......................................................................................................................................3
Aim and objectives......................................................................................................................3
LAGER BUSINESS AND MANAGEMENT CONTEXT.............................................................4
LITERATURE REVIEW................................................................................................................5
Theme:1 Identify the relationship between cost and revenue structure in a business.................5
Theme:2 Ascertain the reason behind discounted prices in Jet Airways despite the rising costs
.....................................................................................................................................................6
Theme:3 Identify challenges that Jet Airways faces within workplace......................................7
Theme:4 Develop appropriate recommendation on the basis of challenges identified...............7
METHODOLOGY..........................................................................................................................8
DATA ANALYSIS.......................................................................................................................10
FINDINGS.....................................................................................................................................19
CONCLUSION AND RECOMMENDATIONS..........................................................................20
EVIDENCE...................................................................................................................................25
Questionnaire.............................................................................................................................25

TITLE
How did the imbalance between cost and revenue structure led to the collision of Jet Airways?
INTRODUCTION
Jet Airways was one of the most successful airlines of Indian origin that was earning soaring
profits and revenue from its customers after just few years of its establishment. However, in the
past eight years, the airline company has regularly been earning losses every consecutive year
(Fernandez, 2019). In this research one of the causes of such downfall in the company i.e. the
revenue and cost structure imbalance of the company would be highlighted and analysed. The
research will conduct appropriate data analysis, draw findings on the basis of such data and then
make appropriate recommendations.
Rationale
The reason that this issue is selected is because this has been termed as the major strategic
failure for the Jet Airways and the reason behind its strategic decline. The company in the
management of its CEO Goyal failed to incorporate a proper vision. They gave regular discounts
on the airfare, i.e. on the ticket pricing in order to remain in competition with their other
competitors in the Indian airline industry. However, the cost was not decreasing because the fuel
prices were constantly rising and consequently, soon the company began selling their tickets on
the discounted prices to a point where they began incurring losses rather than profits. This
research will evaluate the aspects that what caused such imbalance between the revenue and cost
structure and what role did the employee play i.e. how they were affected through the downfall
of the company (Sethi, Dhir and Agarwal, 2015). The reason that this topic has been selected
because this reason has not been talked or researched about much. The other prominent causes
such as poor management, costly investments, lack of any attraction for investors etc. has been
much researched and talked about but the lack of proper structure and balance where tickets were
sold at losses has not been much discussed. Through this research, this particular reason will be
highlighted and analysed and the data will be collected regarding this aspect where the
perspective of employee will also be taken into consideration. This will assist in developing an
evasive study on some new aspects that have led to the downfall of the business.
Aim and objectives
Aim:
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 To analyse the impact of faulty cost and revenue structure on collision of business. A case
study on Jet Airways.
Objectives:
 To identify the relationship between cost and revenue structure in a business.
 To ascertain the reason behind discounted prices in Jet Airways despite the rising costs.
 To evaluate the rising pressure that such faulty revenue structure presents on the employees.
 To develop appropriate recommendations on the basis of challenges identified.
Research Questions:
 What is the impact of a balanced cost and revenue structure in an organisation?
 How did the discounts in airfare affected the revenue generation of Jet Airways?
 What is the impact on the employee of the rising pressure of poor performance?
LAGER BUSINESS AND MANAGEMENT CONTEXT
Jet Airway was international airline company which offered their services in numerous
countries and India also one of them. Organization got fail to execute it’s business in various
countries. There were several reasons or could say mistakes that caused unable to sustain in
airline industries. First was costly purchase Air Sahara which was major mistake of the
organization because they do not have good financial performance. while Naresh Goyal who is
the co-founder of Jet Airway ignored suggestion of professional assistances when they said it
quite costly. it denoted co-founder did not think before paying high cost of air crafter. It showed
communication was not more effective between founder and employees.
Budget airline was another mistake which did by organization. They offered airline ticket
services at low cost for competing with airline competitors i.e. IndiGo, SpiceJet and GoAir. Even
experts said the revenue management that they cannot take trio competitors seriously because
each had variable in the cost structure. But manager developed cut-prices fare strategy even they
knew price of crude fuels could raise. It demonstrated that Jet management was not effective
player or could say fringe player. The reason behind to developed this price strategy was that
they wanted to improve selling revenue. But they failed to determine that low-cost carriers could
attracts only those customers who were price sensitive. The third reason of Jet failure was poor
management style. Goyal’s management took decision to has single management team that was
headed by Goyal. To run overall Jet operations was major mistake because unable to give
attention on operations i.e. full-service carriers and budget flyer. Organization could assign
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responsibility within two team in which one team could run full-service carriers while one team
could focus on the budget flyer. Due to lack of concertation on business led confusion in passage
and investors as well. Agarwal stated that organization had less transparency in decision-making
process while Goyal accused for making bad investment because they had to spend more than
earned. It displayed management was worst because they did not analyse its negative impact and
positive impact. If they analysed positive and negative outcomes before investment then could
possible did not have to face failure.
Crude oil imported from Asia because it famed as crude giant country. Over the past few
years prices of fuels raised by and by which became burden for airlines, so they improved cost of
airline tickets which helped them to get advantage on ticket selling. As knew Indians carriers
were specifically sensitive for fluctuations in the global crude prices. Due to hike prices got
massive loss in airline industries which faced by Indian carriers such as IndiGo, SpiceJet and
British Airway. Over the period, Indian carriers raised price of flight ticket while British Airway
offered discounted fare flight which led high loss in the economy. Another reason was that
organization failed to arrange their balance sheets and unable to caught cyclic changes. it
indicated that organization has poor management which caused they had to face massive loss in
the economic infrastructure.
LITERATURE REVIEW
Theme:1 Identify the relationship between cost and revenue structure in a business
According to Coles and et. al., (2017) cost structure can be defined as the high-level
model of the cost which organization uses to understand fixed proportion of cost and variables of
cost as result can develop a price which easy to affordable for each customer and generates high
revenue within business. Revenue structures refers as a conceptual structure which states and
describes the revenue earning strategy for the business. The revenue model is applied to develop
plan strategy and effectively communicate the revenue streams of a company or investment. The
simple fact is that money generates based on the sales of business’s products and services while
costs refers as an overall expense i.e. interest cost and taxes which generates high revenue. Cost
structure and revenue structure plays effective role in the business performance because cost
structure supports to create price strategy which attracts people to buy the product or services of
the organization. On the other hand, revenue management fix cost of products or services based
on the previous selling infrastructure. Both revenue structure and cost structure communicate
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effectively because revenue management develops costs and fix price while cost structure
implements price strategy and attracts customers to buy the services as result generates revenue.
Thus, both revenue and cost structure keep effective relationship and leads commercial benefits
within organization.
However other perspectives Davies and Chambers, (2018) have criticised in their
published research paper is that cost structure and revenue structure is quite effective model but
requires high maintenance and effective communication. The reason behind is that when revenue
management unable to develop cost strategy based on the previous selling then automatically
selling department cannot attract customer to buy the services.
Theme:2 Ascertain the reason behind discounted prices in Jet Airways despite the rising costs
As per the view of Pedersen, Gwozdz and Hvass, (2018), Jet Airways is international
airline company which offers airline services worldwide. It has strong presence in the global
market. Jet Airway is highly famed as low-cost airline services. Organization offers their airline
ticket services at low-cost so that sells revenue improves and builds good relationship with
customer by giving values of their money. Organization has to face tough competition in airline
industries because there have other companies like Indigo, Jet-Sahara etc. which also offers
similar services to customer but prices of ticket was expensive. To improve selling ratio provides
discounted price ticket to customer by company either the price of petrol was too high. It is the
main reason or the organization to offer discounted price ticket along with full services. Other
reason is that customer like to prefer those airline services which can afford by them, so when
organization rises their cost that gives impact on selling revenue of company. Indigo and Jet-
Sahara provides their airline ticket services at higher cost due to high cost of fuel but after that
their selling revenue was quite high as compared Jet British Airway. Due to highly discounted
fare flights prices leads negative impact on the economic infrastructure because they have to give
full services at low cost as well as have to pay high cost on fuel.
However, other writers Rajee Olaganathan, Miller and Mrusek, (2020) have quoted in the
research paper is that if Jet Airway rises cost of ticket then can possibly number of customers
does not prefer to buy airline service and can switch to other competitive companies i.e. Indio
and Jet-Sahara. It is the main reason that causes organization offers discounted-fare flights and
wants to improve selling revenue of company. But organization does not get effective result on
it’s revenue and business performance as well.
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Theme:3 Identify challenges that Jet Airways faces within workplace
As illustrated by Rossi and et. al., (2019), Jet Airway faces numerous crisis within
organization such as employee resistance, shortage of staff, economical crisis and faulty revenue
structure etc. Organization informs their staff that they will take up 25% cut in their salaries
based on the cost operation for airline. The reason behind is that prices of crude oil is raised
while ticket prices are discounted. So, salary will cut in the range of 5% to 25% in the initial
months. Even organization express their pay cuts are the integral part of cost cutting exercise
because they focus on developing a healthier and sustainable business in the airline industry. To
listen the statement of employer senior employees i.e. management, commander and pilot resist
to cut down from the salary which causes crisis develops between employers and employees. It
directly gives impact on the employee performance, operation and the productivity as well.
Some writers Pan, (2017) has highlighted challenge in their published articles like another
challenge is high cost of crude fuel which causes unable to generate profit margin on the ticket
selling. Revenue management unable to develop effective cost structure which rises pressure on
employee that causes crisis take place and reduces their wellbeing as well. These challenges
direct gives impact on the organization performance.
Theme:4 Develop appropriate recommendation on the basis of challenges identified
According to Stężycki and Wiśniowski, (2016), organization provides tickets on
discounted fare which is wrong step of the organization because it denotes revenue management
unable to develop effective cost strategy which can help company to improve purchasing
behaviour of customer and leads high profit margin instead of loss. so, organization can adapt
competitive pricing strategy instead of low-cost price. There is numerous benefits of competitive
pricing strategy i.e. first organization does not have face loss while paying high cost of crude oil.
Other is competitive pricing strategy helps company to set variable in the cost as per the
customer’s income as result can generate high revenue. Other challenge is shortage of employee
within workplace can overcome if organization adapts 360 feedbacks strategy. the strategy
supports company to understand behaviour of individuals for their job responsibility and
develops healthy working environment.
While other writer Kilian, (2017) have criticised of above recommendations in their
research paper is that competitive pricing strategy and 360 feedback strategy needs to implement
effectively and keeps high maintenance. The reason behind is that it requires high level
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monitoring to analyse it’s impact on the organization performance and working environment as
well.
METHODOLOGY
Research methodology helps in the evaluation of different tools and techniques that can be
used by the researcher in order to conduct the research meaningfully where valid conclusions are
drawn on the basis of relevant data collection techniques (Ndlovu-Gatsheni, 2017). For the
current research, different tools can be evaluated in a following manner:
Research Approach: The research approach mainly signifies the series of steps that would help
in conducting the research effectively. These steps are related to the data collection, analysis and
interpretation of the relevant data. There are two major approaches involving inductive and
deductive approach where the inductive approach is mainly used in qualitative research in which
the facts are analysed to move towards the theoretical conclusions (Basias and Pollalis, 2018).
Deductive approach however is mainly concerned with the quantitative research where the
hypothesis is developed on some theoretical basis and these are then tested in order to identify
whether such theories holds true or not. In the current report, the researcher will use the
inductive approach because of the qualitative research that is being undertaken where all the
theoretical fact and concepts have been evaluated.
Research Philosophy: Research Philosophies describe the basis on which the research will be
conducted and the tools that will be used (Goldberg and et.al., 2017). Out of the two major
classifications of research philosophy i.e. interpretivism and positivism, the interpretivism is
related to the qualitative research where the theoretical facts and figures that are related to the
humans will be analysed and additionally, the positivism philosophy is used in case of
quantitative research where the numerical figures and data is interpreted which are generally
scientific in nature. In the current research, the researcher has used interpretivism philosophy
because the theoretical facts and the human aspect is the major consideration that will be
acknowledged in this research.
Data Collection: This is the collection of facts and figures that will contribute in the analysis and
successful completion of the research. This can be done through two major methods i.e. in the
form of primary data collection or through secondary data collection. The primary data collection
is mainly done by the researcher themselves where the data that is original and has not been
published or used before is collected by the researcher manually (Cuervo‐Cazurra and et.al.,
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2017). Secondary data however involves collection and interpretation of the different journals,
articles and case studies that have already been published but will contribute relevantly in the
research. Currently, the research is using both primary and secondary data collection
techniques where primary data will be collected through questionnaire method and secondary
data will be collected through the relevant literature.
Data Analysis: The procedure of data analysis involves interpretation and analysis of the data
that has been collected by the researcher. The qualitative and quantitative research techniques
have different mechanisms of data analysis (Kumar, 2019). For qualitative data, tools like
thematic analysis etc. are used but for qualitative data, tools like SPSS, MS- Excel etc. are used
in order to conduct and complete the analysis process quickly and comprehensively. In the
current qualitative research, the researcher has used thematic analysis where different themes
etc. are formulated in order to analyse data and different charts, graphs, pie- diagrams etc. are
used to represent the data in a simplified manner. This leads to easy interpretation as well.
Sampling: Sampling is the process of collecting respondents who will contribute effective
contribute in the research and help in conducting research in a better manner. This can be done
through probabilistic sampling or through non probabilistic sampling. Under the probability
sampling the respondents are selected randomly without any pre- determined criteria and under
non- probability sampling, the respondents are selected in a biased manner. In the present
research purposive sampling is used to collect respondents where they will be selected randomly
amongst the population that has been accumulated on a pre- formulated criterion (Fletcher,
2017). Therefore, this will help in reducing the biasness but at the same time increasing
relevancy by collection of authentic respondents. The selected respondents for this research
would include sample size of 30 that would include employees who are currently working in Jet
Airways so that better data analysis can be performed.
Ethical Consideration: The ethical consideration aspect involves ascertaining the fact that all the
ethical aspects have been complied with by the researcher and they have completed the research
by complying with all the ethical requirements. In this research, the researcher will make the
respondents sign up consent form which will state that they have not been coerced or forced to
include biasness in their answers by the researcher in any manner (Ørngreen and Levinsen,
2017). Further, the researcher themselves will also file a declaration form stating that the entire
research activity that has been performed is their own and wherever any secondary references
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that have been found relevant has been incorporate in the research, the authors have been given
the proper references that are required.
Research Limitations: The major limitations of this research involves in the aspect that there
was not adequate time for conducting research. If there had been more time then the research
could have been completed more comprehensively and more detailed analysis could have been
done (Tikku and Sherman, 2019). Another limitation was the limited availability of resources for
research. If there would have been more resources, then a personal visiting with the employees
would have been done thus presenting better insight into the reasons of failure. Therefore, these
were some of the major limitations that were encountered by the researcher.
DATA ANALYSIS
The process of data analysis involves the analysis of the data that has been collected. In the
present research, data was collected from the employee of Jet Airways though email by sending
them questionnaire and the analysis and interpretation of the answers that they gave has been
presented below:
Theme 1: Majority of employees have been working for long time in Jet airways
Years of Working Frequency
0-5 6
5-10 1
10-15 7
15 and more 16
Total 30
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Interpretation: The chart above helps in concluding that the majority of the workforce that was
interviewed had been working in the organisation for more than 15 years and therefore this
downfall affected them severely. In the literature review drawn above as well, it was identified
that employees was the most pressured group in case of any serious crisis that was presented
before the company (Todorov and et.al., 2018).
Theme 2: Majority of people think that there are several reasons behind failure of Jet Airways
Major reason behind collapse of Jet Airways Frequency
High Fuel charges 7
High Currency 3
Poor judgement regarding airfare prices 8
All of above 12
Total 30
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Interpretation: The interpretation of this chart clearly depicts that majority of employees
perceive that there was no single cause that led to the downfall of Jet Airways but a myriad of
consequences. However, the next closest majority aspect is poor judgement regarding airfare
prices constituting 27% which heavily proves the very point and intention with which the
research was performed (Schofield, 2019). Therefore, it can be interpreted that the discounted
airfare prices was a severely bad decision.
Theme 3: Maximum of people agrees that discounted prices was a contributor in failure?
Discounted prices played critical role in failure of company Frequency
Yes 19
No 8
Not Sure 3
Total 30
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